Multiplex Industry by ICRA

The Indian multiplex industry[†] has grown at around 13% CAGR (in terms of operating screens) and 14% CAGR (in terms of revenues) over the last three years. The silver lining though for the industry is the healthy growth of food and beverages (F&B) and advertisement segments which have grown at a faster pace of 21% CAGR over the last three years.

According to Mr. Shubham Jain, Vice President and Sector Head, “The non-exhibition segments - F&B and advertisement – have given a strong push to the overall revenues of a multiplex, a trend which is expected to continue in the near term, given the enormous potential of these segments. Through use of differential offerings with the help of the latest technologies and diversified food options, the multiplex players are striving to improve their average realisations per footfall. A low screen density and smaller scale of operations of the multiplex players in India, compared to global multiplexes, provide ample opportunity to the multiplexes to demonstrate steady growth in the near term.”

As for the single screen theatres, though they still occupy a greater share of the film exhibition market, these have been shutting shop due to the contemporary offerings of the multiplexes, which leave room for the multiplex players to improve their market share.

With the recent implementation of the Goods and Services Tax (GST) in the multiplex industry, the state level entertainment tax has been subsumed with a more standard taxation structure, which will benefit the multiplex industry with the availability of input tax credit. However what can spoil the party is the likelihood of some local state bodies levying additional duties (as has been recently proposed by Greater Chennai Corporation’s Revenue Department), which can have an impact on footfalls if such additional duties result in rise in ticket prices. Further, restrictions by some states on the maximum ticket price that can be charged, and a proposal to dedicate a screen for exhibition of a regional movie during the prime-slot, can impact the profitability of the industry as it may constrain their ability to cover the rising costs. Further measures like a cap on ticket prices will affect the multiplex industry in their ability to increase their average ticket prices to cover the rising fixed costs associated with their operations, thereby impacting profitability. In addition, slower retail development, piracy and rise of alternative video-on-demand services in the recent past are the risks which could also hamper the growth and expansion spree of the multiplexes.

However with a view to push revenues per footfall, the Indian multiplex players have resorted to differential and customised offerings to provide the customers a better movie viewing experience. They have been innovative in opening up of IMAX screens, luxury lounges, kids’ auditorium and on-demand theatre services. With the inclusion of interactive food ordering kiosks and regional gourmet options, the multiplexes are striving to improve their F&B revenues. A lower F&B spend per head to average ticket price ratio at the Indian multiplexes as compared